Argentum Exploration Limited v The Silver

The Court of Appeal dismissed the State of South Africa’s appeal against the High Court’s refusal to strike out or stay an Admiralty action in rem brought by Argentum for salvage of 2,364 bars of silver recovered from the wreck of the SS TILAWA. The principal legal question was whether the State Immunity Act 1978, section 10(4)(a) removes state immunity for an in rem salvage claim against state-owned cargo when both the cargo and the ship carrying it were "in use or intended for use for commercial purposes" at the time the cause of action arose.

The court held that the temporal focus of section 10(4)(a) is the moment when the maritime circumstances giving rise to the salvage cause of action originated (in this case the sinking in 1942), not the moment when salvage services were completed many years later. Because the Silver was shipped pursuant to commercial contracting arrangements (sale on fob terms and carriage by a merchant vessel) it was properly characterised as cargo "in use" for commercial purposes when the voyage and casualty occurred; consequently immunity was removed and the Admiralty Court had adjudicative jurisdiction. The court also concluded that the Receiver of Wreck does not have an implied statutory power to decide the amount of salvage; the Receiver may detain salved property while there is a realistic possibility of salvage being agreed or awarded but must release it once no such possibility remains.

Background and facts.

• In November 1942 the SS TILAWA sank in the Indian Ocean carrying a cargo of 2,364 bars of silver sold to and owned by the Republic of South Africa (RSA). The vessel and cargo lay on the seabed until salvors recovered the silver in 2017. The silver was brought to Southampton and delivered to the Receiver of Wreck pursuant to the Merchant Shipping Act 1995.
• Argentum claimed to be the salvor and issued Admiralty proceedings in rem in October 2019 seeking either a declaration of ownership or, in the alternative, a salvage award.
• RSA acknowledged service and applied to strike out or stay the claim, asserting state immunity under the State Immunity Act 1978 and under article 25 of the 1989 Salvage Convention.

Procedural history. The appeal to the Court of Appeal followed Sir Nigel Teare’s dismissal of RSA’s application in the Admiralty Court (High Court) ([2020] EWHC 3434 (Admlty)). The Receiver and the Secretary of State for Transport intervened in the appeal to address related questions about the Receiver’s statutory powers under the Merchant Shipping Act 1995.

Issues for determination.

1. Whether section 10(4)(a) of the State Immunity Act 1978 removes immunity from an in rem salvage claim against state-owned cargo when "both the cargo and the ship carrying it were, at the time when the cause of action arose, in use or intended for use for commercial purposes", and at what point in time the "use" is to be assessed; and
2. Whether the Receiver of Wreck has the statutory power to determine whether salvage is "due" and, if so, the amount, and whether the Receiver must release salved property to a state owner who successfully establishes state immunity in court proceedings.

Court’s reasoning.

• The majority (Popplewell LJ, Andrews LJ) held that section 10(4)(a) is concerned principally with salvage claims (including salvage of wreck) and that the relevant temporal focus is the point at which the maritime circumstances that make property a recognised subject of salvage "arose" (i.e. when the vessel suffered the casualty and the property had the status of "cargo") rather than the moment salvage services were completed decades later. In consequence the status of ship and cargo for the purposes of section 10(4)(a) is to be assessed by reference to those earlier maritime circumstances.
• Applying that test, the majority concluded that in 1942 the SS TILAWA was in commercial use and the Silver had the character of cargo carried under commercial transactions (sale on fob terms and carriage arrangements) and therefore was "in use or intended for use for commercial purposes". Immunity was therefore removed under section 10(4)(a) and the Admiralty Court could adjudicate Argentum’s in rem claim.
• The court explained that section 10(4)(a) must be read in light of the Brussels Convention (1926) and customary international law; its construction should not produce the anomalous result that merchant ship cargoes always enjoy immunity simply because salvage operations complete long after a casualty.
• On the Receiver’s powers, the court (Popplewell LJ agreeing with Elisabeth Laing LJ’s analysis) held the Receiver does not have an implied power to determine finally the legal entitlement to salvage or to fix the amount; the Receiver may detain salved property while there remains a realistic prospect that salvage will be agreed or awarded by a tribunal, but must release it once no realistic prospect remains (for example where a competent court decides there is no enforceable claim).

Disposition. The appeal was dismissed. The court therefore permitted the Admiralty proceedings in rem to continue and resolved questions about the Receiver’s limited statutory role.

Appeal dismissed. The Court of Appeal held that section 10(4)(a) State Immunity Act 1978 must be read so that the "use or intended use for commercial purposes" of ship and cargo is assessed by reference to the maritime circumstances when the cause of action for salvage originated (here, the sinking in 1942). The Silver and the ship were in commercial use at that time because the cargo was carried pursuant to commercial contracting arrangements, so state immunity was removed and the Admiralty Court had jurisdiction. The court also held that the Receiver of Wreck lacks an implied statutory power to determine finally whether salvage is due or its amount and may detain salved property only while there remains a realistic prospect of salvage being agreed or awarded, releasing it once no such prospect remains.

Appeal from the Admiralty Court (Teare J sitting as a High Court Judge) [2020] EWHC 3434 (Admlty) to the Court of Appeal, neutral citation [2022] EWCA Civ 1318 (this judgment).